UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 2001
Federal Agricultural Mortgage Corporation
------------------------------------------
(Exact name of registrant as specified in its charter)
Federally chartered
instrumentality of
the United States 0-17440 52-1578738
(State or other jurisdiction of (Commission (I.R.S.Employer
incorporation or organization) File Number) Identification No.)
919 18th Street, N.W., Suite 200, Washington, DC
------------------------------------------------ 20006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 872-7700
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(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
99 Press release dated April 19, 2001.
Item 9. Regulation FD Disclosure.
On April 19, 2001, the Registrant issued a press release announcing the
Registrant's financial results for first quarter 2001. The press release is
filed as Exhibit 99 hereto and incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By:
---------------------------
Name: Nancy E. Corsiglia
Title: Vice President - Finance
Dated: April 20, 2001
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FEDERAL AGRICULTURAL MORTGAGE CORPORATION
By: /s/ Nancy E. Corsiglia
---------------------------------
Name: Nancy E. Corsiglia
Title: Vice President - Finance
Dated: April 20, 2001
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
99 Press Release Dated April 19, 2001 5
Exhibit 99
NEWS
FOR IMMEDIATE RELEASE CONTACT
- --------------------- -------
April 19, 2001 Tom Clark
202-872-7700
Farmer Mac Continues Profit Advances in 2001
Operating Earnings Per Share Up 29% for First Quarter
Washington, D.C. -- The Federal Agricultural Mortgage Corporation (Farmer
Mac, NYSE: AGM and AGMA) today announced diluted operating earnings per share of
$0.27 for first quarter 2001, a new record reflecting a 29 percent increase over
first quarter 2000 diluted earnings per share of $0.21, and an 8 percent
increase over fourth quarter 2000 diluted earnings per share of $0.25. Operating
income was $3.2 million for the quarter, compared to $2.4 million for first
quarter 2000 and $2.9 million for fourth quarter 2000. Operating income,
revenues, return on equity and earnings per share are new operating measures
that exclude the cumulative effect of the change in accounting principles
recognized on January 1, 2001 under Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS
133"), and its ongoing effects during the first quarter, in order to present
measures consistent with prior presentations. Net income for first quarter 2001,
including the cumulative and ongoing effects of FAS 133 during the quarter, was
$2.2 million or $0.18 per share.
Farmer Mac President and Chief Executive Officer Henry D. Edelman observed,
"Farmer Mac demonstrated its ability once again to deliver consistent earnings
growth. At the end of the quarter, outstanding guarantee volume for all Farmer
Mac programs was a record $3.2 billion, up 35 percent over the year-earlier
level. During the quarter, daily volume of loan purchases in both the Farmer Mac
I cash window and Farmer Mac II programs grew steadily. With regard to the
latter program, we are pleased to note that Farmer Mac II set a new record, with
purchases of $47 million for the first quarter."
"Furthermore, we did $98 million in Farmer Mac I purchases and guarantees,
including $50 million in long-term standby commitments, and entered into
agreements to provide Farmer Mac I long-term standby commitments for an
additional $151 million that go into effect in the second quarter of 2001. Our
flexibility to meet the changing and growing needs of agricultural lenders
through these and other creative products has enhanced Farmer Mac's ability to
increase its guarantee volume, and demand for these products continues to be
strong in the second quarter. Although the timing and size of these transactions
will vary, lender awareness of their economic and regulatory benefits is growing
in the marketplace and Farmer Mac is ready to meet the needs of the lenders."
"On the whole, we believe that agricultural market conditions for 2001 will
be similar to those of 2000 - low commodity prices, favorable interest rates,
relatively stable land values and consistent federal agricultural support -
notwithstanding the change in the U.S. executive branch. Farmer Mac will
continue to manage its operations within these parameters for the benefit of the
farming community and our stockholders. We are confident that lenders'
increasing focus on capital efficiency, competitiveness and credit concentration
issues will keep the Corporation on track to meet or exceed market analyst
projections as of the date of this release for its financial performance in
2001."
Net Interest Income
Net interest income was $5.5 million for first quarter 2001, compared to
$4.6 million for first quarter 2000 and $4.5 million for fourth quarter 2000.
The net interest yield, exclusive of guarantee fees, was 0.66 percent for first
quarter 2001, compared to 0.67 percent for first quarter 2000 and 0.60 percent
for fourth quarter 2000. The increases in net interest income and net interest
yield resulted from continued growth in our retained portfolio of Farmer Mac
guaranteed securities (AMBS), augmented by sound financial strategies, including
the ongoing rebalancing of Farmer Mac's debt obligations and investment
portfolio in response to developments in the financial markets.
Other Income
Other income, which is comprised of guarantee fee income and miscellaneous
income, totaled $3.6 million for first quarter 2001, compared to $2.8 million
for first quarter 2000 and $3.5 million for fourth quarter 2000. Guarantee fee
income, the largest component of other income, was $3.4 million for first
quarter 2001, compared to $2.6 million for first quarter 2000 and $3.4 million
for fourth quarter 2000. The relative increases in guarantee fees reflect an
increase in the average balance of outstanding guarantees. Miscellaneous income
was $166,000 for first quarter 2001, compared to $182,000 and $149,000 for first
quarter 2000 and fourth quarter 2000, respectively.
Operating Expenses
During first quarter 2001, operating expenses totaled $2.6 million,
compared to $2.4 million for first quarter 2000 and $2.3 million for fourth
quarter 2000. Operating expenses were consistent as a percentage of operating
revenues for the same quarters at 29 percent, compared to 33 percent and 28
percent, respectively, in the prior periods.
Credit
As of March 31, 2001, Farmer Mac I loans purchased or guaranteed after the
enactment in 1996 of changes to Farmer Mac's statutory charter ("post-1996 Act
loans") that were 90 days or more past due, in foreclosure or in bankruptcy
represented 2.62 percent of the principal balance of all post-1996 Act loans,
compared to 1.45 percent as of March 31, 2000 and 1.25 percent as of December
31, 2000. (Farmer Mac assumes 100 percent of the credit risk on post-1996 Act
loans; pre-1996 Act loans are supported by mandatory 10 percent subordinated
interests that mitigate Farmer Mac's credit exposure.) Farmer Mac anticipates
fluctuations in the delinquency rate from quarter to quarter, with higher levels
likely to be reported during the first and third quarters of each year due to
the semiannual payment characteristics of most Farmer Mac loans. While the
year-over-year increase is not insignificant, it is more reflective of liquidity
issues in the agricultural sector than a decline in land values or other
potentially serious drivers of loan losses.
Total direct governmental payments to the agricultural sector for 2000 are
estimated by the U.S. Department of Agriculture (USDA) to have been a record
$22.1 billion, resulting in farm income levels during 2000 significantly above
the decade (1991-2000) average. The federal income support is not allocated
equally to producers of all agricultural commodities, however, and farmers and
ranchers producing agricultural commodities that receive significant federal
income support should demonstrate greater liquidity than those who do not
receive payments. It is expected that additional federal support will be
provided to the agricultural sector in 2001, although the specific amount has
not yet been determined.
As of March 31, 2001, the weighted average loan-to-value ratio for all
post-1996 Act loans was 50.7 percent. Although Farmer Mac expects to recognize
losses on the existing post-1996 Act delinquent loans, management believes that
those losses are adequately covered by the reserve for losses, based on the
value of the collateral securing the loans. Management believes that the
delinquent loans have current loan-to-value ratios that adequately protect
against losses at liquidation, with the exception of certain loans that are
partly secured by depreciable assets that may result in Farmer Mac incurring
losses upon loan liquidation. Farmer Mac recognized $321,000 in losses in first
quarter 2001. Farmer Mac's provision for principal and interest losses was $1.4
million for first quarter 2001, compared to $1.3 million for first quarter 2000
and $1.3 million for fourth quarter 2000. As of March 31, 2001, Farmer Mac's
reserve for losses totaled $12.4 million, or 0.49 percent of outstanding
post-1996 Act loans, compared to $7.9 million (0.42 percent) as of March 31,
2000.
Provision for Income Taxes
The provision for income taxes totaled $1.6 million for first quarter 2001,
compared to $1.3 million for first quarter 2000 and $1.6 million for fourth
quarter 2000. Farmer Mac's effective tax rates for each quarter was 35.5
percent.
Capital
Farmer Mac's regulatory core capital totaled $104.8 million as of March 31,
2001, compared with $91.6 million as of March 31, 2000 and $101.2 million as of
December 31, 2000. The capital balance as of March 31, 2001 exceeded Farmer
Mac's regulatory minimum capital requirement by approximately $14.1 million.
On April 12, 2001, the Farm Credit Administration ("FCA") issued its final
risk-based capital regulation for Farmer Mac. The regulation is scheduled to
become effective in approximately one month, and one year after the effective
date Farmer Mac will be required to meet the risk-based capital standards. As
noted in our June 12, 2000 comment letter to the FCA on the proposed regulation,
Farmer Mac believes that certain significant aspects of the risk-based capital
regulation do not comply with the authorizing statute. The economic model
incorporated in the regulation is extremely complex, and we are still analyzing
its potential effects. We have requested that FCA assist us in understanding the
operation of the regulation and the model; however, if unchanged, the regulation
- - particularly those provisions that suggest to us that the FCA went outside the
authorizing statute - could lead to an increase in the capital requirement for
certain newly guaranteed off-balance sheet program assets and so alter Farmer
Mac's strategic plan for future growth. While we are at this time uncertain
whether the regulation, as issued, would alter that strategic plan, we expect
that any issues raised by the regulation will be resolved in accordance with the
authorizing statute before Farmer Mac is required to meet the risk-based capital
standards.
Average return on equity, excluding the effects of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, and FAS 133, was 12.3 percent for first quarter 2001,
compared to 10.5 percent for first quarter 2000 and 11.5 percent for fourth
quarter 2000.
Change in Accounting Principles
FAS 133, a revised accounting rule for determining the treatment of
derivative securities, became effective as of January 1, 2001. FAS 133 requires
financial derivatives to be measured and recorded at fair value. Such
derivatives, which Farmer Mac uses to hedge interest rate risk, were previously
accounted for as off-balance sheet items and disclosed in the financial
statement footnotes.
The cumulative effect of this change in accounting principles, which
accelerated recognition of certain costs associated with derivative instruments
formerly amortized over the lives of those derivative instruments, was a charge
of $726,000 and a negative adjustment of $8.6 million to other comprehensive
income within stockholders' equity recognized on January 1, 2001. Farmer Mac
projects that the charge to income will be offset over time (predominantly over
the next two years) as Farmer Mac recognizes income from the assets hedged by
the derivative instruments without recognizing any amortization of the related
costs. Additionally, further net after tax charges against earnings under FAS
133 during first quarter 2001 totaled $380,000, and those included as net after
tax reductions to other comprehensive income were $3.6 million. Management
believes that reporting results by reference to operating income, revenues,
return on equity and earnings per share provides a more accurate comparison of
Farmer Mac's financial performance to previous presentations.
Forward-Looking Statements
In addition to historical information, this release includes
forward-looking statements reflecting management's current expectations for
Farmer Mac's future financial results, business prospects and business
developments. Management's expectations for Farmer Mac's future necessarily
involve assumptions, estimates, and the evaluation of risks and uncertainties.
Various factors could cause actual events or results to differ materially from
those expectations. Some of the important factors that could cause Farmer Mac's
actual results to differ materially from management's expectations include: (1)
uncertainties regarding the rate and direction of the development of the
secondary market for agricultural mortgage loans; (2) uncertainties in the
agricultural economy resulting from low commodity prices, weak demand for U.S.
agricultural products and crop damage from natural disasters; and (3) the
implementation of additional statutory or regulatory restrictions applicable to
Farmer Mac, such as the imposition of regulatory risk-based capital requirements
with an aggregate effect in excess of the statutory minimum and critical capital
levels or restrictions on Farmer Mac's investment authority. These and other
factors are discussed in Farmer Mac's Annual Report on Form 10-K for the year
ended December 31, 2000, as filed with the Securities and Exchange Commission on
March 26, 2001. The forward-looking statements contained herein represent
management's expectations as of the date of this release. Farmer Mac undertakes
no obligation to release publicly the results of any revisions to the
forward-looking statements included herein to reflect events or circumstances
after today, or to reflect the occurrence of unanticipated events.
Farmer Mac is a stockholder-owned instrumentality of the United States
chartered by Congress to establish a secondary market for agricultural real
estate and rural housing mortgage loans, and to facilitate capital market
funding for U.S. Department of Agriculture guaranteed farm program and rural
development loans. Farmer Mac's Class C and Class A common stocks are listed on
the New York Stock Exchange under the symbols AGM and AGMA, respectively.
Additional information about Farmer Mac (as well as the Form 10-K referenced
above) is available on Farmer Mac's website at www.farmermac.com. An audio
recording of the conference call to discuss Farmer Mac's first quarter 2001
earnings and this press release will be available on Farmer Mac's website after
2 p.m. eastern time, Friday, April 20, 2001.
* * * *
Federal Agricultural Mortgage Corporation
Consolidated Balance Sheets
March 31, December 31, March 31,
2001 2000 2000
--------- ------------ ---------
(in thousands)
Assets:
Cash and cash equivalents ................. $ 320,437 $ 537,871 $ 344,822
Investment securities ..................... 819,957 836,757 927,673
Farmer Mac guaranteed securities .......... 1,711,183 1,679,993 1,289,175
Loans ..................................... 12,407 30,279 28,897
Financial Derivatives ..................... 593 -- --
Interest receivable ....................... 33,570 55,681 29,308
Guarantee fees receivable ................. 3,055 5,494 2,618
Prepaid expenses and other assets ......... 14,856 14,824 16,827
Total assets ............................. $2,916,058 $3,160,899 $2,639,320
Liabilities and stockholders' equity:
Notes payable:
Due within one year ...................... $2,024,233 $2,201,691 $1,781,310
Due after one year ....................... 715,901 767,492 745,735
Total notes payable ..................... 2,740,134 2,969,183 2,527,045
Financial Derivatives ..................... 19,610 -- --
Accrued interest payable .................. 15,706 20,852 11,904
Accounts payable and accrued expenses ..... 12,417 26,880 5,398
Reserve for losses ........................ 12,386 11,323 7,901
Total liabilities ........................ 2,800,253 3,028,238 2,552,248
Stockholders' equity ...................... 115,805 132,661 87,072
Total liabilities and stockholders' equity $2,916,058 $3,160,899 $2,639,320
Federal Agricultural Mortgage Corporation
Consolidated Statements of Operations
Quarter Ended
March 31, December 31, March 31,
2001 2000 2000
(in thousands, except per share amounts)
Interest income:
Investments and cash equivalents ....... $ 21,088 $23,147 $21,958
Farmer Mac guaranteed securities ....... 28,740 28,886 21,694
Loans .................................. 603 534 1,240
Total interest income .................... 50,431 52,567 44,892
Interest expense ......................... 44,978 48,061 40,276
Net interest income ...................... 5,453 4,506 4,616
Gains/(Losses) on financial derivatives
and trading assets ....................... (589) -- --
Other income:
Guarantee fees ......................... 3,428 3,368 2,582
Miscellaneous .......................... 166 149 182
Total other income ....................... 3,594 3,517 2,764
Total revenues ........................... 8,458 8,023 7,380
Other expenses:
Compensation and employee benefits ..... 1,237 1,168 1,251
Regulatory fees ........................ 223 133 150
General and administrative ............. 1,145 966 1,007
Total operating expenses ................. 2,605 2,267 2,408
Provision for losses ................... 1,383 1,297 1,317
Total expenses ........................... 3,988 3,564 3,725
Income before income taxes ............... 4,470 4,459 3,655
Income tax provision ..................... 1,588 1,586 1,297
Net Income before cumulative effect ...... 2,882 2,873 2,358
Cumulative effect of change
in accounting principles, net of tax ..... (726) -- --
Net income ............................... $ 2,156 $ 2,873 $ 2,358
Earnings per share:
Basic earnings per share ............. $ 0.19 $ 0.26 $ 0.22
Diluted earnings per share ........... $ 0.18 $ 0.25 $ 0.21
Earnings per share excluding cumulative
effect of change in accounting principles:
Basic earnings per share ............. $ 0.26 $ 0.26 $ 0.22
Diluted earnings per share ........... $ 0.25 $ 0.25 $ 0.21
Operating Earnings per share:*
Basic earnings per share ............. $ 0.28 $ 0.26 $ 0.22
Diluted earnings per share ........... $ 0.27 $ 0.25 $ 0.21
* operating earnings per share excludes the cumulative effect of FAS133 and its ongoing
effects during the first quarter
Federal Agricultural Mortgage Corporation
Supplemental Information
The following tables set forth quarterly activity regarding: loan purchase
commitments; loan purchases and loan guarantees; AMBS issuances; delinquencies;
and outstanding guarantees.
Commitments to Purchase or Guarantee Farmer Mac I Loans (1)
- -------------------------------------------------------------------------------------------------------
Long-Term 5 and 7 Year
Fixed Rate Resets ARMs Total Outstanding
------------- ----------------- ------------- --------------- --------------
(in thousands)
For the quarter ended:
March 31, 2001 $ 40,463 $ 11,447 $ 59,494 $ 111,404 $ 18,398
December 31, 2000 159,039 2,261 70,454 231,753 13,223
September 30, 2000 288,274 126,909 40,097 455,280 10,983
June 30, 2000 45,838 2,822 32,361 81,021 8,641
March 31, 2000 10,369 16,835 32,438 59,642 10,707
December 31,1999 317,357 6,882 75,326 399,565 12,470
September 30, 1999 26,623 19,384 34,170 80,177 17,010
For the year ended:
December 31, 2000 384,944 158,013 164,390 707,347 18,398
December 31, 1999 537,190 58,065 203,536 798,791 12,470
Commitments to Purchase or Guarantee Farmer Mac I Loans (1)
- -------------------------------------------------------------------------------------------------------
Long-Term 5 and 7 Year
Fixed Rate Resets ARMs Total Outstanding
------------- ----------------- ------------- --------------- --------------
(in thousands)
For the quarter ended:
March 31, 2001 $ 40,463 $ 11,447 $ 59,494 $ 111,404 $ 18,398
December 31, 2000 159,039 2,261 70,454 231,753 13,223
September 30, 2000 288,274 126,909 40,097 455,280 10,983
June 30, 2000 45,838 2,822 32,361 81,021 8,641
March 31, 2000 10,369 16,835 32,438 59,642 10,707
December 31,1999 317,357 6,882 75,326 399,565 12,470
September 30, 1999 26,623 19,384 34,170 80,177 17,010
For the year ended:
December 31, 2000 384,944 158,013 164,390 707,347 18,398
December 31, 1999 537,190 58,065 203,536 798,791 12,470
Federal Agricultural Mortgage Corporation
Supplemental Information (continued)
Farmer Mac I AMBS Issuances (2)
- -------------------------------------------------------------------------------------------
Long-Term 5 and 7 Year
Fixed Rate Resets ARMs Total
------------- ----------------- ------------- ---------------
(in thousands)
For the quarter ended:
March 31, 2001 $ 14,425 $ 4,900 $ 47,047 $ 66,372
December 31, 2000 6,777 1,176 27,824 35,777
September 30,2000 5,589 3,790 35,916 45,295
June 30, 2000 15,122 4,950 36,749 56,821
March 31, 2000 6,582 14,616 45,880 67,078
December 31, 1999 128,641 8,084 17,069 153,794
September 30, 1999 95,121 33,532 24,744 153,397
For the year ended:
December 31, 2000 34,070 24,531 146,370 204,971
December 31, 1999 359,185 57,887 277,517 694,589
Farmer Mac I Delinquencies (3)
- ---------------------------------------------------------------------------------------------------------------------
Distribution of Post-1996
Post-1996 Pre-1996 Act Delinquencies
As of: Act Act (5) Total as of March 31, 2001
------------------------------ --------------- -------------------------
By loan-to-value ratio:
March 31, 2001 2.62% 5.83% 2.72% 0.00% to 40.00% 13%
December 31, 2000 1.25% 6.49% 1.44% 40.01% to 50.00% 15%
September 30, 2000 1.80% 5.55% 1.96% 50.01% to 60.00% 31%
June 30, 2000 1.25% 4.12% 1.41% 60.01% to 70.00% 38%
March 31, 2000 1.45% 4.89% 1.65% 70.01% to 80.00% 3%
--------
December 31, 1999 1.05% 3.04% 1.18% Total 100%
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Federal Agricultural Mortgage Corporation
Supplemental Information (continued)
Outstanding Guarantees (4)
Farmer Mac I
Post-1996 Act Pre-1996 Farmer Held in
AMBS LTSPC Act Mac II Total Portfolio (5)
(in thousands)
As of:
March 31, 2001 $ 1,466,443 $ 1,083,528 $ 72,646 $ 549,003 $ 3,171,620 $ 1,648,896
December 31, 2000 1,615,914 862,804 83,513 517,703 3,079,934 1,581,905
September 30, 2000 1,621,516 707,850 92,536 491,820 2,913,722 1,571,315
June 30, 2000 1,354,623 575,143 100,414 467,352 2,497,532 1,292,359
March 31, 2000 1,310,710 551,423 107,403 387,992 2,357,528 1,268,889
December 31, 1999 1,266,522 575,097 118,214 383,266 2,343,099 1,237,623
September 30, 1999 1,118,266 367,934 130,452 377,663 1,994,315 1,190,741
(1) Includes long-term standby purchase commitments ("LTSPCs"), which obligate
Farmer Mac to purchase loans in the pool at par when they become four or
more months delinquent. In exchange, Farmer Mac receives an annual
commitment fee on the outstanding balance of the pool over the life of the
loans.
(2) Includes AMBS issued and retained by Farmer Mac. Such transactions totaled
$33.9 million in first quarter 2001, $20.7 million in fourth quarter 2000,
$25.0 million in third quarter 2000, $21.7 million in second quarter 2000,
$46.5 million in first quarter 2000 and $50.6 million in fourth quarter
1999.
(3) Includes loans 90 days or more past due, in foreclosure or in bankruptcy.
(4) Pre-1996 Act loans back securities that are supported by unguaranteed
subordinated interests representing approximately 10 percent of the balance
of the loans. Farmer Mac assumes 100 percent of the credit risk on
post-1996 Act loans. Farmer Mac II loans are guaranteed by the U.S.
Department of Agriculture.
(5) Included in total outstanding guarantees.